Expert Financial Analysis and Reporting

Following approval of Bevyxxa, Portola stated that it expected to launch in the US in the September to November time frame. Subsequently, the Company alerted investors to a manufacturing issue that could delay the launch. During yesterday’s conference call, the Company said that it hopes to be able to launch in November, but also said that the launch could be delayed until 1Q, 2018. It also acknowledged that there is an (unlikely) scenario in which the delay could be longer.

The WAC price of Bevyxxa will be $15 per capsule which I estimate will translated into about $10 on a net basis. This lightly more than the other Factor Xa inhibitors Xarelto and Eliquis. The recommended length of therapy is 35 to 40 days with one capsule so that the revenue per patient treated should be about $350 to $400.

The FDA accepted the AndexXa BLA for review and has set a PDUFA date of February 2, 2018. If the BLA is approved, the US launch could begin in mid-2018

Portola ended 2Q, 2017 with $270 million of cash which management states can fund operations into 1Q, 2018. The Company is going to require a very significant amount of cash to fund the launch of Bevyxxa and AndexXa. It reiterated that it plans to appropriately capitalize the company during 2H, 2017.

The uncertainty on timing of the Bevyxxa launch layers on some uncertainty for investors as does the need for substantial financing in 2H, 2017. While the approval of AndexXa is highly probable in February 2018, it is “never over until it’s over”. I acknowledge that these uncertainties could weigh on the stock in the near term. However, the strong probability of Portola introducing two blockbuster potential drugs in the next year far outweighs these issues and I continue to recommend purchase. Conclusion of the financing, a successful outcome on Bevyxxa allowing for a 1Q, 2018 or earlier launch and approval of AndexXa could trigger a major rally in the stock price over the next half year.

Please refer to my initiation report of May 4, 2017 “Portola Pharmaceuticals: Initiating Coverage with a Buy (PTLA, $40.05)” for a comprehensive review of the company.

The FDA Issue in Regards to Manufacturing

Portola’s contract manufacturer used a three step process to produce Bevyxxa in polymorphic form 1 for the phase 3 trial. The manufacturing release specification in the NDA which was approved by the FDA was based on this. However, for the commercial launch, a seeding step was added to improve consistency, stability and manufacturing cycle time. However, it was determined that this resulted in up to 15% of Bevyxxa being produced as form 2 polymorphic. Phase 2 trials have shown that there is no meaningful difference between form 1 and 2.

Portola is requesting that the FDA alter the release specification for Bevyxxa to allow for some amount of Form 2. Portola made this request in June and the FDA responded with questions which will require a submission that will result in a four month review. If this satisfies the FDA, Portola could launch in November. The FDA questions primarily deal with quantifying the characteristics of form 2 and the Company feels that it has all of the data to satisfactorily respond. If so, the launch could begin in November at the earliest.

If the FDA insists on 100% form 1 polymorphic. Portola would need to revert to the three step manufacturing process used during the phase 3 trial. The Company said that reverting to this process would be straightforward, but would require another regulatory submission. This would push the launch into 1Q, 2018. The Company acknowledged that there is some (it feels small) chance that the FDA might not agree to change the release specification or allow reversion to the prior manufacturing process in which case, the launch could be delayed beyond 1Q, 2018

Pricing of Bevyxxa

Bevyxxa is priced at a WAC price of $15.00 per pill (either 40 mg or 80 mg) which compares to $12.93 for Xarelto. Taking into account discounts, allowances and compliance issues, the net price is likely to be around $10. The suggested duration of use is 35 to 42 days which indicates that revenues per patient treated could be $350 to $420 per day. This is roughly in line with my pricing estimates.

Now that the price has been established, Portola will begin the process of getting the drug on hospital formularies. This process can take three to six months or more. The Company is targeting the top 1000 hospitals which treat about 60% of the addressable market. The plan calls for deploying 100 to 150 sales reps in 2018 who will also market AndexXa if as I expect, it is approved in early 2018.

AndexXa BLA

The FDA accepted the BLA for review and has set a PDUFA date of February 2, 2018. If the BLA is approved, the US launch could begin in mid-2018.

Financial Issue

Portola ended 2Q, 2017 with $270 million of cash which management states can fund operations into 1Q, 2018. The Company is going to require a very significant amount of cash to fund the launch of Bevyxxa and AndexXa. It reiterated that it plans to appropriately capitalize the company during 2H, 2017.

1 Comments

larry, without asking you to look into the minds of the individuals running this company…are you at all surprised by the insider filings on Aug 18 — William Lis CEO (7,435),Tai Fu EVP,CBO (1,991), Mardi Dier CFO (3,635) and John Curnutte EVP (2,644)…all sold at the same price ($54.86) on the same day, and in each case the filing showing these were sales of directly owned shares leaving no beneficially owned shares following the transaction. The same price, the same day…suggests these were options that were exercised and sold. Have you looked into the proxy filings at all to see if, in fact, there are substantial unvested options that keep these people’s “skin in the game”? While this kind of activity happens all the time, I am a little surprised to see the CEO apparently owns NO shares directly. Are these guys just hired hands?

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